E-book prices to rise as Amazon, Sony adopt agency model

Both Amazon and Sony have reached new agreements with publishers that will see …

With the first shipments of iPads in transit, it's looking like Apple's impending entry into the e-book market has shaken up the market's pricing structure. Apple has offered book publishers what has been termed an "agency model" for pricing, in which they get to control the price of books offered for sale via the iPad's software. Amazon had bought e-books for the Kindle at wholesale prices, and then set the prices for retail purchases. After a series of public battles with publishers, it's looking increasingly like Amazon is throwing in the towel and accepting the agency model. At the same time, and with little fuss, Sony has also adopted the agency model for pricing in its e-book store.

The Wall Street Journalis reporting that Simon & Schuster and i's Newscorp stablemate Harper Collins have both reached new pricing agreements with Amazon. The deals will see the publishers set the prices of best sellers, many of which will increase to the $13-15 range. Similar deals with Hachette and Penguin are said to be close.

Assuming that those are completed ahead of the iPad launch, it means that Apple and Amazon will be offering very similar collections of e-book content. The remaining member of the big five publishers, Random House, hasn't announced any deal with Apple; its books will presumably remain on sale at Amazon under the existing pricing model, at least for the time being.

Throughout the process, the third major player in the e-reader/e-book market, Sony, has kept quiet about its plans. After receiving a reader tip, however, we contacted a Sony spokesperson, who confirmed that, over the next several days, its store would also be seeing some changes in the pricing of e-books as the company adopts the agency model for sales. Sony has reached agreements with the same set of publishers—Penguin, Harper Collins, Macmillan, Hachette Book Group and Simon & Schuster—that have already signed on with Apple.

So, it appears that the agency model is well on its way to being the e-book standard. Descriptions of most of the deals indicate that they will also guarantee similar pricing across all stores, meaning that the publishers can't use their price-setting abilities as a weapon, favoring one platform at the expense of others. Consumers can also expect that, whatever reader platform they choose, they'll have access to content at identical prices. Because of incompatible DRM schemes, however, they'll still face a platform lock-in once they've purchased a significant amount of content.

There seems to be little doubt that the move to the agency model was triggered by Apple's decision to enter the e-book market, helped by a healthy dose of expectations that the iPad will be a hot seller which will introduce e-reading to new users. Apple's choice of this model seems, at least superficially, to simply reflect a decision to handle pricing for e-books in the same way it handles pricing for apps. But it's difficult not to suspect that Apple relished the opportunity to force a new pricing model onto Amazon, given that's precisely what Amazon had done to it in the music market.